“We are approaching the end of the first half of 2023. How are we doing with our reforms?” – Almas Chukin, famous economic observer analyses non-systemic transformations performed by our Government. 

In his telegram-channel, Mr. Chukin shared his sober-minded analysis of the “outstanding performance” of our government in the first six months of 2023.

“On one side, all inconvenient questions have been raised and we saw some motion. But there is no impression that there is a sound plan behind that motion. We do not see a chorus, we see a pack of vocalists. Let us take an example, that will illustrate the role of the government in the construction of a hypothetical house. First of all, they need a layout, so that they know what is to be built. Then they need a cost estimate, based on which they will calculate the total budget. Then, they must pave the foundation of the building – energy, roads, transportation, infrastructure and communications. Later, they will think about walls, i.e. various functions of the state (education, defense, governance). When that hypothetic house is in place, let its dwellers decide where to put partition walls and how they will communicate amongst each other”.

Key Problems in 2023

“ Let us take a look at energy – oil production to home heating. That is one crucial sphere. And that sphere is now under cardinal reforms! Let me enumerate the problems, and they discuss decisions made in 2023:

    Oil transportation – acute problem, which is total dependence on Russia (Caspian Pipeline Consortium);

    Critical gas shortage (even stepping down from some of our export liabilities did not help to close the inner demand);

    Decades of negligent funding into critical communications resulting in high losses of power throughout national grid and often break-downs in Thermal Power Plants;

    Excessive load on the KEGOC national power distribution grid, critical wear-out of local power grids, tens of thousands of kilometers of power grids “outside auspices”;

    AI-95 gasoline and jet and diesel fuel season shortages;

    Critical wear-out of primary power sources, shortage of maneuvering power sources;

    Low level of digitalization of the energy sector.

All above problems are well-known and we do not suffer from lack of ideas how to address those problems.  I just do not see presence of economic plan, as well as clear relief plan. Every step requires clear vision of the price of the problem, as well as end-result ”.

Energy Calamity

Let us try to analyze those Renewable Energy mega-projects, so popular these days. It all started with the announcement of a 1-gigawatt project under aegis of Total (France) with Samruk and KMG holding 40% stake. Then, as signed MoUs with China and Middle East. There are 4-5 such projects (4 gigawatts) and they are going outside the limits of legislation. At the same time, the government, through Samruk and KMG holds stakes in them and expands them. Direct contracts with foreign investors with unclear and untransparent terms and conditions do not look like competitive market. Their technical implementation is one big question.

Ekibastuz Regional Power Station #1 (GRES-1), Kazakhstan most powerful power plant, produced 4 thousand megawatts of power at the peak of its form. It had 8 generation blocks, 500 megawatts each.  Since those times, 1 or 2 blocks are idle. The MoUs with foreign investors envisage construction of 4 gigawatt renewable energy sources (wind generation). Where will we hook them up?

As it is now, the KEGOC grid is not technically capable of integrating additional 4 gigawatts.

Capacities of stations and grids must be in accord in each point of generation and consumption.

Let us suppose, that the new gigantic sources will be built in the South of Kazakhstan, as written in those MoUs. That means, Southern grid must be seriously reinforced and upgraded. That means, power delivery from the North will reduce. Which means, we do not need to build lines from North to South, we need lines from Semey to Turkestan or Mangistau. If we do generate colossal volumes of power in the South, as written in those MoUs, then we will need new industries in the South – those that consume a lot of power. We need roads, homes for people etc. Those are complicated solutions, and without proper economic brainstorming we will risk to waste tens of billions of Dead Presidents.

The Ekibastuz GRES-1 chimney features in the Guinness Book of Records, as the world’s tallest – 420 meters, which is 100 meters taller than the Eiffel Tower in Paris.  We could add two more records. The tallest chimney in the world, and the most time-consuming construction site in the world. The power plant was supposed to have 8 generation blocks. 2 of them were built in the times of USSR, the third one has been under construction for 30 years. 

Gas Industry Calamities

Now, let us talk about gas. Uzbekistan will buy from Russia 2-3 billion cubic meters of gas. The gas will run in the pipeline, that once used to pump gas from South to North. Now, the pipe will reverse towards South through our territory. That will change the purpose of the pipeline. Our Energy Ministry announced plans to connect the Sary-Arka pipeline (earlier built to deliver gas to Astana) with the Kostanay-Astana-Pavlodar-Semey-Oskemen pipeline (Russia to China gas route). In the first glance, the project appears beneficial, but there are many questions.

One thing is clear — such decisions are made once and forever.

We are not building parallel pipelines – as long as we have one pipe, there is no need in another.

On the 1^st of July, they will impose new tariffs, reaction to which is unlikely to be positive, for sure. People need explanation of additional social support. I see neither.